Industrial Composition

An area with a diverse industrial composition tends to experience less severe economic cycles. Combined with the occupational composition, the industrial composition in conjunction with a per employee economic measure, provides information on the quality of jobs in a region.

The industrial composition as displayed on Arizona Indicators is expressed in two ways: as the share of total employment contributed by each of 20 sectors and as the share of total gross domestic product (GDP) contributed by each sector. The industrial composition is displayed for Arizona and for the nation for the latest year. Earnings per employee by sector also are presented. A diverse industrial composition with disproportionate shares in sectors with high earnings per employee is the ideal.

The GDP estimates by state for the latest year are labeled as “advanced” or “accelerated”—an abbreviated set of mostly preliminary data and a simplified methodology are used to generate these estimates. Even after the estimates are revised, some of the inputs to the calculation of GDP by state are estimated.

The annual employment figures are estimates. No distinction is made between full-time and part-time employment.

Visualization Notes:

Note: Sectors are listed in order of the average wage in the United States

Primarily due to large differences in the average wage across sectors, Arizona’s industrial composition looks different when measured by employment than when measured in dollars, such as by gross domestic product (GDP). Based on GDP, two sectors account for more than 10 percent of the total: real estate and government. Based on employment, government, retail trade, and health care have shares greater than 10 percent.

Visualization Notes:

Note: Sectors are listed in order of the average wage in the United States

A diverse industrial composition, but with disproportionately large shares in high-paying sectors and relatively small shares in highly cyclical sectors, could be considered to be the ideal composition. The industrial composition in Arizona is moderately different than the national average based on employment, with a larger variance from the national average based on gross domestic product (GDP).

In general, sectoral shares in Arizona were smaller than the national average in high-paying sectors — particularly manufacturing, but also information and professional, scientific, and technical services. In contrast, sectoral shares in Arizona were larger than the national average in sectors paying average and below-average wages in 2010. The larger retail trade, and somewhat larger accommodation and food services, shares in Arizona are a reflection of the importance of the tourism industry, but the average wage is quite low in these sectors. The result is an overall industrial mix that is tilted toward lower-wage jobs.

Visualization Notes:

Note: Sectors are listed in order of the average wage in the United States

The overall average earnings per employee in Arizona in 2010 was $47,753; earnings include fringe benefits as well as wages and salaries. In eight of the 20 sectors, the average is at least 20 percent above the overall figure; in eight sectors, the average is at least 20 percent below the overall figure.

A number of factors cause earnings per employee to vary considerably by sector—from less than $25,000 to $125,000. One cause is that the average annual number of hours worked varies by sector, but the major factor is that the nature of the typical job varies widely by sector. In particular, wages are highly correlated to educational attainment; the percentage of jobs requiring a university degree differs considerably by sector. For example, despite lower wages than in the private sector for the same occupation, the average wage is above the overall average in the government sector since the government’s workforce disproportionately consists of workers holding a bachelor’s or advanced degree.

Visualization Notes:

Note: Sectors are listed in order of the average wage in the United States

Arizona’s average earnings per employee in 2010 was 7.7 percent less than the national average. In the nine sectors in which average earnings was well above the overage average nationally, Arizona’s average was less than the U.S. average in eight, and more than 10 percent less in five sectors. In the eight sectors in which average earnings was considerably below the overage average nationally, Arizona’s average was greater than the U.S. average in five.

The earnings per employee differences by sector between Arizona and the nation are strongly affected by the industrial composition within a sector. For example, a disproportionate share of Arizona’s small manufacturing sector consists of high-tech industries, so the overall manufacturing average wage exceeds the national average.